WHEN: Today, Wednesday, May 1, 2019
WHERE: CNBC's "Squawk on the Street"
The following is the unofficial transcript of a FIRST ON CNBC interview with Mondelez CEO Dirk Van de Put and CNBC's Sara Eisen on CNBC's "Squawk on the Street" (M-F 9AM – 11AM) today, Wednesday, May 1st. The following is a link to video of the interview on CNBC.com: https://www.cnbc.com/video/2019/05/01/watch-cnbcs-full-interview-with-mondelez-ceo-dirk-van-put.html.
All references must be sourced to CNBC.
SARA EISEN: Mondelez reporting a stronger quarterly profit, leaning on its overseas market and international sales. This as price increases in North America helped combat rising costs and decreasing volume. Stock is higher this morning, up almost 2%. Joining us now, Mondelez CEO Dirk Van de Put. Welcome back, Dirk. Nice to see you.
DIRK VAN DE PUT: Good to see you, too. Thank you for having me again, Sara.
SARA EISEN: So, when I broke these numbers on "Closing Bell" last night, I basically said, you know, strong underlying quarter, but also really strong headwind on foreign exchange. How would you characterize it?
DIRK VAN DE PUT: Yes. Yes. I would say we see very good what we call organic growth, which is the growth that the constant currency and driven by about 1% growth in developed markets, but over 8% growth in our emerging markets and that's obviously our differentiating factor. At the same time, we have some currency headwinds this quarter, compared to last year's quarter. The dollar is stronger and so that got reflected in the reported results. Now, I would say we are differentiated because of our exposure to foreign markets over the long-term that will play into our advantage, but short-term you will have these quarters where the currency is really not in our favor.
SARA EISEN: Yeah. I want to dig into that emerging markets number. 8.5% growth there. What drove that? Is that an economic story or more strategic and what you're doing on the ground?
DIRK VAN DE PUT: Yeah, no, no. I don't think that's an economic story. We see it across all our emerging markets. They all grew. I think it has to see with the fact that we are investing more. We are investing in more communication in our brands. We are investing more in what we call route to market, so, our products are available in more stores. We are also innovating more. And overall, that is creating a momentum in those markets. I mean, India is up mid -- sorry, double digit. China is up mid-single digit. Russia is up, Southeast Asia, Mexico, even Brazil, which last year was a difficult factor for us. So, we see it across the board. There's some countries in there where the economic situation is not so great, but we are in snacking, we still have a lot of open space in those markets, so that's really what's driving our growth.
SARA EISEN: You know, we keep hearing the narrative from food companies that millennials don't want the packaged food brands of their parents, Velveeta Cheese, Campbell's Soup, and yet Oreo cookies are growing double digits abroad and single digits in this country. How do you keep up the momentum with an old brand like that?
DIRK VAN DE PUT: In fact, Oreo is one of the most loved brands for Millennials and for Generation Z. And the reason that has come to be is the fact that we have evolved as a brand with the times. The purpose of the brand is to stay playful. And it's a message about growing older but staying yourself and enjoying yourself, spending time with those who are close to you. And at the same time, the consumer wants more and more different products. They want different flavors, they want experiences with brands. And we were able to, in Oreo, to keep on having that connection with millennials and Generation Z. And at the same time as you probably have seen, we do a lot of creative stuff as it relates to the product and that really seems to be working at moment and we're very happy. At the same time, the other big brand, which is Cadbury, also grew almost double digit in this quarter. It is also on a roll. Those are two biggest brands. Cadbury is more based on generosity, but that's also connecting really well with the younger generations and we're seeing the same effect there. So, I think for what you call old brands, it is possible to still connect to younger consumers, but you need to do it in line with what their expectations are.
Carl QUINTANILLA: Dirk, I think Oreo is actually a really interesting business case study. Because it is playful as you say. I was in the store the other day, I saw Peanut Butter Filling, I had never seen that before. But how do you to decide which flavor is too far out on a limb? And then, how do you manage the sort of supply chain interruption of infusing new flavors and all that complexity that brings to the manufacturing process?
DIRK VAN DE PUT: Yes. Yes. That's a good question. When do you go too far? What is not acceptable? We do a lot of testing and try to hit it. Last time, we talked about things like Mango Oreo or Spicy Chicken Oreo or Wasabi Oreo in China, which seemed a little bit far out here. But I think that's part of what we're trying to do. We try to adapt to local consumer's tastes. But the testing basically shows do the consumers like it and will there be enough interest in that product so that it has enough sales. It does -- we managed most of those flavors with what we call in and outs. It is not a permanent item. So, it is not as if we do Peanut Butter Oreo and it's not selling enough, that stays in our veins forever. Then we will take it out and put another one in. So, we try to keep the supply chain complexity as limited as possible. But yes, that's probably one of the biggest challenges that we face, but that's -- I think it is what is going to make consumer goods companies successful. If you can manage that complexity, it is driven what I call personalization, everybody wants what they prefer and they want it for them because that's where we are these days. If you can do that in a cost-efficient way in your supply chain, that's how you are going to win in this new consumer world.
SARA EISEN: I mean, clearly Mondelez is very different than some of your competitors in that you purely focus on snacking and you're so internationally exposed, three-quarters, I think, of your business outside the U.S. Do you think the market is at this point has given you credit for that? You have been running higher than the food peers but still at a multiple that is less than other consumer staples.
DIRK VAN DE PUT: I think they have been giving us credit. I think there is still some upside there. I think what has happened, about two years ago, our growth was a bit lackluster and we have been saying we want to put consistent growth numbers, quarter after quarter, and we call that 3% plus is what you should be able to count on us for—topline, I'm talking topline now. And now we've had a number of quarters where we have been close to, and in this quarter, we beat it. And we feel that the momentum is building, that we are entering into a virtual cycle. So, I think as the market will see, that we can give that consistency in our delivery of our numbers, that's when I think we'll see a couple more turns on our multiple.
SARA EISEN: Dirk, we're going to talk about pot here in another segment. Just wondering whether you've done any exploration into the CBD craze? We're sort of waiting for the big food and beverage companies to get there. Haven't seen it yet.
DIRK VAN DE PUT: No, we have been exploring it. Our view on it is that we have a number of family brands, Oreo would be an example, so we feel a little bit hesitant about doing anything with CBD in family brands. But we have other brands or new brands that we could do. So, we have been looking at it. The space is not clear. I think it is a bit clearer in nonfood products. In food products, I'm hoping that the FDA will bring some clarity in the coming months. So, we have been looking at it. We have also been looking at what are the claimed benefits from CBD. And, yes, we are getting ready, but obviously we want to stay within what is legal and play it the right way. But I do think that CBD, which is the alternative of THC, which doesn't provide you the high and so on, but which has a number of very interesting health benefits, I do think that that will be something that will enter the main food space in the not so far future.
SARA EISEN: So rated R Oreos for munchies, maybe, in the future?
DIRK VAN DE PUT: That, I don't know yet.
SARA EISEN: Dirk Van de Put.
DIRK VAN DE PUT: We'll see. We'll see where it all is heading. But it is obvious that the edible space in that universe will be interesting and something to watch.
SARA EISEN: We're watching. Thank you very much, Dirk. Good to talk to you.
DIRK VAN DE PUT: Thank you so much.
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